Ladies and gentlemen, thank you for standing by. Welcome to the Q4 earnings release conference call. At this time, all lines are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions]. And as a reminder, today's conference is being recorded. I would now like to turn the conference over to Sujal Shah. Please go ahead.

Good morning and thank you for joining our conference call to discuss TE Connectivity's fourth quarter and full-year 2015 results. With me today are Chairman and Chief Executive Officer, Tom Lynch, President Terrence Curtin, Chief Financial Officer, Bob Hau. During the course of this call, we will be providing certain forward-looking information. We ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will be using certain non-GAAP measures in our discussion this morning and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. Finally, for participants on the Q&A portion of today's call, I would like to remind everyone to limit themselves to one follow-up question to make sure we are able to cover all questions during the allotted time. Now, let me turn the call over to Tom for opening remarks.

Thanks, Sujal. Thanks everybody for joining us today. Over the next half hour, I will be providing a state of the company update, essentially a 2015 year-end review. I will also share our view of the economic environment in terms of what we see today and what we expect over the next year. Terrence Curtin, our President will discuss our business performance in detail. Bob Hau, our CFO will cover the highlights of Q4 and full-year financial performance and I will wrap up with the details of our guidance and key underlying assumptions. 2015 was a very important year for TE. We made excellent progress on our strategy of expanding our leadership position in harsh environment connectivity and establishing a leading position in the sensor market. Economic cycles will ebb and flow, but we believe the strong secular trend of electronic content growth has a very long runway, especially in harsh environments, where we have focused the company. TE has the broadest range of connectivity and sensor products and we are very well positioned to take advantage of this secular trend. During the year, we strengthened our position in harsh markets with a significant level of design wins across our harsh portfolio, most notably in our automotive business. We expect that over the long-term we will generate sales growth of 6% to 8% in our core auto connectivity products on 2% to 3% vehicle production growth, which is a forecast for the next five years. In fiscal 2015, we completed the integration of our Sensor acquisition. Our hypothesis underlying these acquisitions was that our unmatched presence across virtually every industry, coupled with the broad technology range we are acquired would enable us to grow faster than the market and eventually expand into integrated solutions. This is playing out very well…

Thanks, Tom and good morning, everyone. If you could please turn to slide six for me to review transportation solutions. Overall our transportation solutions segment performed very well in fiscal 2015. Revenues of $6.4 billion was up 4% at both actual end rates as well as organic rates. Our adjusted operating margins were 20.4%. Once again we delivered growth above the market due to the secular driver of content growth, along with new platform wins across our global customer base. In the fourth quarter, revenues in the segment grew 2% organically. Our auto business grew 3% organically in a flat global vehicle production environment. Growth in the auto business was driven by Europe and the U.S. as well as Asia Pacific outside of China. Our sales in China during the quarter were essentially flat. Our auto business is exceptionally healthy with a rich pipeline of new platform ramps from design wins generated over the past several years that will continue to drive growth well above the market. From an order prospective, during the quarter we did see the slowdown in China we discussed last quarter and our order stabilized in the fourth quarter with the third quarter levels. These order trends, however, will affect our first quarter sales as China was very strong in the first quarter last year. For 2016, we expect China vehicle production to be up only 2% compared to 2015 and longer-term we expect China auto production growth in the range of 5% to 7%. As expected, our commercial transportation business was down in the quarter due to the continued weakness in the global construction and agricultural markets with Europe being the only bright spot where we had growth in that market. We do expect the commercial transportation market will remain weak in 2016. In our…

Thanks, Terence and good morning, everyone. Please turn to slide nine. It will provide more details on earnings. Adjusted operating income was strong at $488 million, up 12% in constant currency, including $60 million of foreign currency headwinds, operating income was flat with prior year. GAAP operating income was $407 million and included $11 million of acquisition related charges, $28 million of restructuring charges driven by data and devices, as well as oil and gas and $43 million of other charges related to the BNS divestiture. Adjusted earnings per share was $0.90 for the quarter, $0.02 above prior year with strong operational performance on lower sales, incremental benefit from share buyback and negative impact of currency exchange rates. GAAP EPS was $0.34 for the quarter and included acquisition related charges of $0.03, expense from tax items of $0.40 and restructuring and other charges of $0.13. For the full year 2016, I expect approximately $75 million of restructuring charges. We ended 2015 with a full-year GAAP income tax rate of 21.4% and an adjusted effective tax rate of 22.3%. I expect the full-year adjusted effective tax rate of approximately 23% to 24% for 2016. Now turning to slide 10. Our adjusted gross margin in the quarter was 32.5%. It was negatively impacted by lower volume and lower sales of high margin products, including those in the distribution channel. Adjusted operating margins expanded 50 basis points driven by productivity from TEOA, restructuring savings and cost management. Total operating expenses were $482 million in the quarter and down 9% from the previous year, primarily driven by benefits of one-time expense reductions and overall cost control. We are making reductions in discretionary spending, but also continue to invest in harsh businesses as we see the slowdown as temporary. As a result, we do expect operating expenses to rise sequentially in Q1 as we get back to a typical quarterly run rate. In the quarter, cash from continuing operations was $540 million and our free cash flow was $389 million. On June 4, 2014, we received $100 million benefit from the sale of an underutilized asset which impacts the year-over-year comparisons with the cash flow. Gross capital expenditures were down $15 million year-over-year and expect capital spending rate to be approximately 5% of sales for 2016. We continue to have a balanced capital allocation strategy. In 2015, we returned $1.7 billion to our shareholders of which $759 million was returned in Q4. During the quarter, we bought back 10 million shares, roughly half of which came from the proceeds of the Broadband Networks divestiture. Since 2007, we reduced our outstanding share count by approximately 20% and expect to continue reducing share count in 2016. Now we have added a balance sheet and cash flow summary in the appendix for additional details. I will turn it back over to Tom.

Thanks Bob. Please turn to slide 11 and I will cover guidance at a high level and we do have some additional details provided in the slide deck in the back. As we mentioned earlier, in the last 90 days we have seen demand further weaken particularly in China and across many industrial markets. This drove the weak Q4 orders I discussed earlier and translates to a soft Q1. We now expect Q1 revenue of $2.7 billion to $2.9 billion, down 8% from the prior year and adjusted EPS of $0.72 to $0.80, down approximately 15% year-over-year. We do expect continued growth in the U.S. and European automotive market, commercial aerospace and in SubCom. This will be more than offset by broad-based inventory reductions in the channel and continued softness in China. Q1 is also impacted significantly by negative FX translation which is more than offsetting the benefits of the share repurchase on EPS. Please turn to slide 12. For the full year, we expect revenue of $12.4 billion, up 1% versus the prior year and reflecting 3% organic growth at the midpoint. Our adjusted EPS guidance is $4, representing a year-over-year growth of 11% at midpoint. Our guidance does include the impact of a 53rd week in our fiscal year, which includes approximately $200 million in revenue, $0.05 in EPS. It also includes the benefit of share buyback and the negative impact of currency exchange rates. On a constant currency basis, revenue is expected to grow a little over 4% and adjusted EPS is expected to grow by 14% year-over-year. Our full year outlook is based on the following market and regional assumptions. In transportation, we expect mid single-digit actual and organic growth. We are assuming that global auto production is roughly flat year-over-year with the first half being…

[Operator Instructions]. And we will go the line of Amit Daryanani. Your line is open.

Prefect. Thanks a lot. Good morning, guys. Two questions for me. One, maybe just looking at the fiscal 2016 EPS guide, I think at the midpoint you are implying about $0.40 incremental EPS year-over-year on probably no revenue, about 1% maybe, right. Could you maybe talk about, if I think about the $0.40 EPS uptick, how much of that is going to come from operating margins or whole levers versus buyback deals that you have are probably some kind of a split between the two?

Hi, Amit. I think kind of three key drivers. We certainly get a nice lift and Bob will talk a little bit more later on, I am sure, from the buyback in the first half of the year. We still have to overcome the negative impact of translation. We don't really see net impact of buyback or translation in any significant way until the second half. And our second half assumes we get back to low to mid single-digit growth rates, which we expect will power operating earnings improvement. So it's a pretty significant contribution from the buyback, lesser contribution for the full year from operating margin improvement. In a flat year, we expect that the relatively flat at the OI margin, but up in the second half over prior year.

Got it. And then, Tom, Terence, you both seem to be fairly convinced that this is more of benign inventory correction and things should start to normalize in a quarter or so. I guess I assume you can talk about, are you seeing the different book-to-bill auto trajectory between what you see in the channel versus OEM that gives you comfort that this is more of an inventory correction versus a bigger demand vacuum that maybe we are getting into?

Let me take that, Amit. Good morning. When you think about it, we did see and as I talked a little bit in the industrial overview I gave, we did expect through our channel partners, it would probably be pretty flat in the fourth quarter and actually their activity, through their point-of-sale and what we saw was probably more down mid-single digit which then clearly creates pressure on them trying to get their inventory back in position. We did also see OEMs, especially in places like the United States that we did see the slowing, move a little before that earlier in the quarter. So we have seen the traditional OEMs start and the channel partners and when we look at it, it feels very similar back in 2012 and 2013, where we had a similar phenomenon where you had stepped out in growth that occurred and then clearly supply chain start to correct. The other area that we are expecting a channel correction is in China auto. I think when you look at the order comments I made and where China those orders stabilize, but we are getting impacted in the first quarter as that growth of that market slows down from what used to be a 10% production environment to 2% production growth environment. So there are a lot of signals. On that, I would say our orders in October are sort of where we expect them to be versus the forecast we have given. So it does seem to have stabilized, but we have to see. I think when it comes out is certainly the big wildcard.

Thank you.

Can we have the next question, please?

And that will be from the line of Wamsi Mohan from Bank of America Merrill Lynch. Your line is open.

Yes. Thank you. Good morning. Tom, can you elaborate on what you are seeing in China, particularly as it relates to the auto end market? Maybe if you could share some clarity on what the trends have been you to the extent that you can see between like Tier 1, Tier 2 cities versus lower tier and domestic versus multinational corporations? And I have a follow-up.

Sure, Wamsi. I was just there a couple weeks ago. Imagine, spent a lot of time with our auto team. So the macro trends is early in the year, this calendar year, we began to see the growth rate of registrations decline and production follow that. There was a couple of blips up and down through the year. But I would say, form March on a pretty steady decline through July. And a lot of folks think that's in reaction, a little bit of the slowing of the economy, I think the great uncertainty and then of course the volatility in the China stock market where individuals have quite a lot invested. But what we have seen recently is registrations picking up and I think on the verge of the third month in a row of registrations picking up, which is a really good sign. In some ways not surprising because you still have a lot of positives in the China economy. The growth of the consumer and services sector, which the government has been trying to accomplish for a long time and now that's the biggest sector of the economy and that puts a lot less volatility in the economy. It also continues to drive significant wage growth as people move from the interior into the city. In terms of demand between the Tier 1s, Tier 2s, Tier 3s, I think we will see that three and four cities growing faster just because there has been a lot less car purchases there over the last three to four years and those cities, they are growing faster than the Tier 1s and Tier 2s. And in multinational versus local, a little more momentum in the local customers lately. They have a very nice fleet of SUVs and SUVs has become very popular in the last year. For us, we are strong across all the OEMs there in the Tier 1. So a switch between multinational and local doesn't really affect us. And in fact in the last big downturn, we did a lot of things to get much closer to the local suppliers and we provided more services to them than the typical connectivity supplier would and that served as well and got us a lot of designing over that time. So shifting trends, but when you really translate that back into content per vehicle in China, it's still moving up. There isn't a big change in the content per vehicle. We continue to see the fundamental trends, the more electronics. And people want to own cars. So this recent trend is very encouraging as its ramping pretty nicely from registration level in July to registrations level in October.

Thanks, Tom I appreciate the color there. And then one for Bob really quick. Bob, is there a way to think much of that EPS benefit or margin benefit year-on-year's coming from a commodity tailwinds if you could quantify that for all of 2016, that would be great. Thanks.

Yes. I think the best way to think about it, first off is, certainly we are seeing improvement/tailwind in a number of our commodities, the largest one, the biggest to move is copper. So we are definitely anticipating improvement year-over-year on that. What does moderate that, of course, is we have a hedging program and so you don't see big moves or shocks to the up or down side of our commodities. So I would say, we expect probably$0.08 to $0.10 benefit in 2016 over 2015 as some of the hedging that we put in place throughout 2015 feathers in over the next 12 months.

Great. Thank you.

All right. Thank you, Wamsi. Can we have the next question please?

That will come from the line of Mike Wood with Macquarie. Your line is open.

Hi. Thanks for taking my question. It would be very helpful if you could quantify the gross margin impact from the destocking in this quarter and then your fiscal first quarter 2016, just so we can get a better understanding of the underlying gross margin trends?

Good morning, Mike. Yes. I think the way to think about it, as you saw in the slides in my opening comments, we definitely a decline in gross margin. That's been a key tenet of our operating performance over the last several years and it is still very nicely from where we were two or three years ago. What I think we are experiencing in Q4 is not only the impact of distribution in particular, but overall volume, revenue down on actual basis 3%, organically flat. You see that impact flow through the factories in terms of absorption of cost when you get that quick reduction. Additionally impacting is not only the declines in distribution, which is a higher gross margin business for us, but also things like oil and gas and commercial vehicle. So all three of those distribution, commercial vehicles and oil and gas are better than company average margins and that creates, use a four letter word, mix issue for us but certainly something that as the distribution channel recovers, as we see that inventory correction improve in the second half year, we will see those gross margins come back.

Okay. Can you also given us the amount of TEOA operating margin improvement factored into 2016?

So I think as I mentioned, we see the gross margin and the operating margins improve on a year-over-year basis in the second half, as certainly there is benefits of TEOA, there is benefits of the volume coming back, as well as benefits of some of the restructuring actions we have taken. I think in our opening comments, we did mention, we don't expect commercial vehicles to rebound. That's been a tough market for the last few quarters. We expect that to continue. Same with oil and gas. I think the distribution channel will help keep a lift but certainly continue to drive productivity through TEOA and the metals benefit will also impact gross margins, as I said earlier in response to Amit's question.

And Mike, I would just add one thing about TEOA. If you were to go back before we use, we really had TEOA well established in the company. We typically did not offset price erosion with productivity. So we are very dependent on the volume to carry margin improvement. One of the reasons we are up 400 basis point, some of it is certainly the portfolio and some of it is because now TEOA is offsetting typically the 1.5% to 2% price erosion. So it's a significant contributor to that margin growth. So that when we do get the 4% volume growth, which six or seven years ago would not produce 80 basis points of margin improvement, now has enabled us drive 80 basis points. So it's subtle and it roving in there, but it's very, very significant. And of course the key thing with TEOA and it's primary purpose of it is to drive customer experience and drive high quality, which we generally get the best marks for the industry and high on-time delivery. So it's just really served as well as we have driven this across the company.

Okay. Thank you.

All right. Thank you, Mike. Can we have the next question please?

That's from the line of Matt Sheerin with Stifel. Your line is open.

Yes. Thanks and good morning. A question regarding your comments on the communication solutions and your intent to deselect revenue and I think you talked about $30 million in the next couple of quarters. What does that translate in terms of annual revenue run rate? And what does that do to the margin structure of that business? And are there related restructuring charges or costs that you plan to take out there?

Yes. So Matt, a few of us can probably answer this question for you, part of our core strategy has been to reposition the business around the products that really have margins. The power products, miniature products, the high-speed products which we are best at and move away from the commodity products. So to kind of put it perspective, we took out almost $200 million worth revenue in 2015 and we held the profit in that business. And that was a negative margin business. It was very low margin business. We just felt it wasn't strategic in any way and had very little prospect to improve margins. So the cost actions we took to enable us to maintain profitability at the same level with $200 million plus margin, I think hopefully that gives you a perspective of where we are going with that business.

I would also add, Matt, it's Terrence, when you look at next year, I mentioned there will be $30 million of a headwind in quarter one and quarter two, that will tail down probably for the year, about $90 million in total. It really ties in to when we talked last year about the combination of our Datacom and devices unit as we got that focus. So Bob, if you want to talk to charges.

Yes. I think, Matt, I mentioned that we have got about $75 million of restructuring charges anticipated in 2016. A good portion of that is associated with actions we have got underway in data and devices. As you recall, last year 2015, we also had significant restructuring charges. We spent on a full year basis, about $93 million. 60%, 65% of that was the data and device business units. So we are definitely aggressively attacking the cost structure as well as [indiscernible] benefit impact continues in 2017 and beyond.

Okay. That's helpful. And then regarding the commercial transportation business. You talked about that continuing to weaken next year. Obviously you are starting off of a pretty low base and tough comps year over year, which will get easier at the end of your fiscal year. But are you expecting that to bottom in the next quarter or so and stabilize? Or will that continue to weaken?

No. we expect the market to remain weak and I do think we expect some bottoming around middle year. But overall we are expecting growth in that market for the year.

Okay. That's it for me. Thanks a lot.

Thank you.

Thanks, Matt. Can we have the next question please?

And that will be from the line of Shawn Harrison with Longbow Research. Your line is open.

Good morning. I was hoping to talk about the buyback just in terms of how much is left and maybe if you could walk us through the cadence of the buyback expected through the end or I guess throughout the next couple quarters? And when you think you will be done with using all the proceeds from the BNS sale?

Yes, Shawn. Good morning. We started the share buyback in the fourth quarter. We closed the deal at very end of August. So the month of September, we were in the market. For the quarter, we spent about -- we returned about $625 million. About half of that was the proceeds from the BNS transaction. So call it $0.7 billion or so left. And I think the way to think about it is, we will exhaust that. We will have completed that return probably by the end of third quarter of this fiscal year.

And to be clear, that's in addition to the consistent cadence have of $150 million to $250 million a quarter, which you have targeted previously?

The money become pretty fungible one it hits the bank account. We have got the cash now and there are some practical limits to how many shares we can buy in a given quarter or a given day with some, the 10b-18 rules. So I think the way to think about it is the BNS proceeds get returned in the first three quarters and then fourth quarter we look to get back into the more normal phase.

Okay. And then maybe just another way to ask the inventory question. Is there any way to parse out how much of the decline in bookings you saw exiting or for the quarter, that was tied to inventory corrections, be it either at the channel level or the OEM level versus just weaker general demand? I know it ends up being mixed a bit. But any clarity there probably gives us greater confidence in this back half ramp.

Yes. Shawn, it's Terrence. When you look at it and certainly to your point, it does get mixed when you look at the math patterns. But we estimated both through channel and OEM ordering we think it's a little shy of $100 million. So probably in that $75 million to $100 million range, certainly spread across China, as well as our OEM and distribution partners.

Thanks so much, Terrence.

Thank you, Shawn. Can we have the next question please?

And that will be from the line of Craig Hettenbach with Morgan Stanley. Your line is open.

Yes. Thank you. Tom, there still seems to be questions from investors in terms of buyback versus M&A and you are going to go through the proceeds of BNS to use that to buyback stock. But can you just talk about your balance sheet, your cash flow and the optionality you have for doing potential deals and also what the deal environment looks like today?

Sure. I think we feel very good as the highest level with a strong balance sheet, strong ongoing cash flow generation and especially a lot of cash in the bank now, the ability to return the BNS cash and to continue the two-thirds, one-third capital allocation, we feel like we have enormous flexibility. There is a nice pipeline that we have and it's very focused on harsh businesses, as we have dedicated many times. And I think the way to think about it, it wasn't that long ago, we spent $2 billion on the sensor acquisitions and the oil and gas acquisition and they quickly went back into normal share buyback and then we did the BNS deal and now we are into much bigger share buyback, I think what all that says is, the broad strength of the company gives us a lot of choices. If you go back a few years ago, when we met $2 billion on Deutsch, we went a couple of quarters without buyback, but then went right back into it. And then had a year of a lot of buyback, almost all of our cash flow going to buyback. So I think that we are pretty confident that while M&A may take precedence in one quarter and buybacks in another that over a couple year period, that two-thirds, one third, really fits with our business strategy, first and foremost. So just to reiterate, we look at our strategies, the areas we want to lead in, the products that we want to add to our portfolio so we can take advantage with our scale, that's what drives our strategy and our M&A pipeline and then we balance that against where we believe this company has a lot of value creation ahead of us and it makes sense to use a fair amount of our cash flow to take back shares. So I think you could continue to expect a very balanced approach here operating within this two-thirds, one-third framework that we have. And whenever there comes a point that we need to change that, we will give plenty of advanced notice, but it's been working very well for us.

Okay. Thanks for the color. And as a follow-up for Bob, when you think about the SubCom business, the growth into fiscal 2016, can you touch a bit on the margins? I know typically as those programs ramp in force, the margins improve over the course of the programs. So can you touch on that?

Yes. The way to think about it is, in this $700 million, $800 million range, we are nicely into double digits, low teens. As we approach $1 billion over the next several years, depending on the timing of new programs and how quickly those ramp up, you can expect us to get up in the company average operating margins.

Got it. Thanks.

All right. Thank you, Craig. Can we have the next question please?

And that's from the line of Jim Suva with Citi. Your line is open.

Thanks very much. A question regarding the industrial solutions segment which, in my mind, has quite a bit of area for improvement. When we think about the decline in sales versus the decline in operating margins, obviously there's leverage there that's going on in a negative manner and things like that. Is there anything to believe that if we were to see the exact opposite, that margins shouldn't rebound right back up to where they were prior to that decline? Or is there something going on within the business? The reason I ask is, with actual down 12% in sales, organic down 7% and seeing operating margins down 23%, that's kind of quite a big deleveraging. So I am just wondering if there's anything in addition we should be aware of? Or if indeed sales at some point were to improve and say be up 12%, should we be up right back to where we were the operating margins or even better, given TEOA?

Jim, it's Terence. So I think you are thinking about it right. When we look at that segment, we do view that segment long-term should be above the company average. So from that framing we still believe that. I think when you look at the fourth quarter, clearly the revenue decline as well as oil and gas with some of the distribution slowness which are higher all sort of hit at once. That exasperated the margin. But when you look at it, clearly places like commercial air, industrial equipment, defense are above company average. So I do believe that as that comes back and we get through some of the destocking, you will see that market move back up and there will be an opportunity.

Great. Thank you very much and congratulations to you and your team.

All right. Thank you, Jim. Can we have the next question please?

That will from the line of Mark Delaney with Goldman Sachs. Your line is open.

Yes. Good morning and thanks very much for taking the questions. First question is a follow-up on the supply chain inventory reductions that the company was talking about. And I was hoping you could help us understand where you expect inventory of TE products to be at OEMs and distributors as you exit 1Q? And the reason I ask is, I am trying to get a better sense for what gives you guys the confidence for the revenue pickup in the remaining quarters of fiscal 2016, because even stripping out the extra week, it looks like you are assuming above seasonal quarter-on-quarter trends for the remainder of the fiscal year.

Yes. I think when we view this inventory correction, it's really a three quarter process. It started in Q4. Our current assumption is that it's the worst impacted in Q1, but still fairly significant impact in Q2. So it's going to take nine months. And we don't really have any big spring back baked in this year. So almost I think about it as, it kind of gets neutral in the second half of the year. So our second half isn't really thinking of a spring back. The way I would frame it, were you to think about how the year will progress, starting with Q4 of this year you have a negative impact from China, you have negative impact form inventory and the continued year-over-year negative impact of foreign exchange. The core markets, everything excluding that, running pretty steady. We go into Q1, it's a little worse on China and inventory. It continues at about the same negative impact year-over-year on FX. As you move into the second half of the year, our assumptions and we will have indicators over the next couple months, but our assumptions are inventories in balance as you end the second of the year, China has come down to a level where it should start growing again, because it come down quite a bit from where it was a year ago and FX is kind of a wash. The dollar could change, but if it stays at the current rate, it's pretty much a wash in the second half of the year. And the rest of the business, we are not expecting any miracle in the second half. We are expecting production growth to be 1% to 2% in the second half. We are expecting core industrial demand to be 1% to 2%. So they are not really, I don't think aggressive assumption and really reflecting what we are hearing from our customers. So that's the way I, at a very high level, think about how we expect our year to unfold based on those assumptions.

Okay. Appreciate that. As a follow-up question, something to talk about OpEx. OpEx was nicely down in the fiscal fourth quarter, below what I was expecting. Can you help us understand where OpEx dollars should be in fiscal 1Q 2016? And then to what extent there's still any excess OpEx associated with the BNS transition agreement and if you could quantify that?

Mark, I think the way to think about it is, first of all, we very typically have a rebound Q4 to Q1 of OpEx spending. There is typically a ramp that you see in the first quarter of every fiscal year. So expect to see that and we certainly expect OpEx, in general, to return to more normal level in 2016 over what we saw in fourth quarter more normal than first three quarters of the 2015. In terms of the BNS transaction, we talked initially about what we refer to as stranded cost. Some of the cost of the central services that we have. We use that kind of revenue. You don't necessarily take out dollar-for-dollar from a cost standpoint. We are still in the midst of transition or transaction services, agreements with the buyer and that will be in place for up to help a few years, a couple of years. We don't expect them to last forever. And individual countries, individual activities will feather in an out and that will give us the opportunity to manage those costs as those TSA programs unwind.

Thank you.

Okay. Thank you, Mark. Can we have the next question please?

That will from the line of William Stein with SunTrust. Your line is open.

Hi, guys. This is Joe Meares, calling in for Will. Thanks for taking my question. I just had two questions regarding meas and the sensor business. What inning would you say you are in with regards to margins going from being dilutive to the transportation segment to being accretive?

Well, I would say we are still in the early innings of that. As you know, we said it from the beginning, hypothesis was this will provide us accelerated growth in a market that we had a small beach at. That is definitely playing out as our design wins have been really great, even exceeding our high expectations and the core organic growth rate continues in double digits despite a sluggish economy. the margin, we expect will take a few years to move out. It's definitely dilutive, but still generating 20 points margin in that segment. We do have the dilutive effect of sensors, but there is a clear path as we bring our scale to this business to get those margins. First thing, get them above company average and then get them up near the transportation average. But we are in the early innings on that. That's going to take some time, because the design wins to turn into sales and then to take advantage of that and turn that into scale. It's very much tracking to our plan and we feel great about that that acquisition.

That's helpful. Thanks. I guess as a follow-on, you did mention, the transportation operating margin looked pretty solid despite the weakness in commercial transport at over 20%. What's helping here? Is it mostly the restructuring stuff that you guys have done? Or maybe mix in the other businesses?

Yes, Joe. There has not been restructuring going on in transportation other than what we did several years ago. There was a little bit of work that was done early in the year around the acquisition. But that was very small and definitely behind us.

I think what it is, it is the basic productivity and efforts around TEOA and in this business. We expect the business to be at or better than 20% operating margin. I know there were a lot of questions at the end of the third quarter, because it dipped slightly below that. We, at the time, said look, it was largely driven by a pretty significant decline in commercial transport. We see that again this quarter, but we see the 3% organic growth in automotive that's just continuing to push productivity across the business. IT has been and will continue to be our highest operating margin business.

Great. Thanks, guys.

Okay. Thank you, Joe. Can we have the next question please?

That's from Sherri Scribner with Deutsche Bank. Your line is open.

Hi. Thank you. Thank you for providing some of the detail on the linearity of your expectations for sales growth in automotive through 2016, but I was hoping you could give us some detail on your thoughts of the linearity of industrial sales as we move through fiscal 2016? What are your expectations? How much upside in the second half is baked in? And then following that, can you give us some sense of your expectations for operating margins in the industrial segment? Should we expect them to get back to fiscal 2014 levels? How should we expect them to progress through the year? Thanks.

Sherri, it's Bob. I think the comments we made around the inventory correction has been in the distribution channel. You may recall that the largest segments that participate in the distribution channel is the industrial solutions business. So as we see that inventory adjustment work itself out in the first half of the year, you will see that improve towards our second half and get us better year-over-year growth rates second half over what we have got first half. That does give us, on a full year basis, a low single digit growth organically as those supply chain numbers work out. In terms of operating margin for the industrial solutions business, I do expect an improvement in 2016 over 2015 and probably not too far off to think back in the 2014 levels. That 3% organic growth gives us a volume into our factories and we have said for the last couple of years volume will help continue to work TEOA. We did some restructuring back in 2013, 2014 in this business. And as that volume comes back, we will see those margins improve. And I think Terrence, in an answer to an earlier question, we expect this business to be better than company average out into the future in terms of overall operating margin.

Okay. That's helpful. I guess just to clarify on the growth you expect through the year, is the primary driver of weaker growth the inventory correction? Or do you see some overall demand that you think will improve in the second half?

Sherri, it's Terence. I think there are a couple of things. So when you look at the first half, we are going to be impacted by the inventory as well as oil and gas. We will still have a little bit of a headwind on us in the first half, because of how that came down. So when you say that those two impacts will happen in the first half. When you look at the second half, like I said earlier, comm air side of the business, the medical part of the business, we do expect to be strong. But we do think the general industrial space did take a step down in growth. But we still think it will be growth once these inventory correction work out.

Thank you.

Okay. Thank you, Sherri. Can we have the next question please?

And that will be from the line of Steve Fox with Cross Research. Your line is open.

Thanks. One more question on linearity, if I could. Just to clarify in terms of your thinking from a broad standpoint, are you assuming that some of the growth rates that you are talking about for the second half of the year are achievable even if oil prices stay where they are and the U.S. dollar stays where it is, because that's obviously been affecting demand beyond just direct oil and gas segment.

Maybe one way to help put a little clarity, as we think of our portfolio, we see about 70% of the portfolio is going to solid mid single digit growth. And that's mostly our big harsh businesses like auto, commercial air, our sensor business for sure and SubCom. So when you put those together, we are going to have solid growth really through most of the year with the exception of Q1. We expect our industrial and our energy and appliance businesses to get back and work through the inventory correction start to grow in the second half. But we are not looking at, as I said earlier, miraculous growth. Kind of low single digit growth. And we expect industrial transportation, oil and gas, data and devices to be down year-over-year for the year. So I guess the answer specific your question, we are not assuming any benefit from something happening in oil and gas or any further worsening from oil and gas sure.

That's fair. And then just one quick follow-up, given the timing of some of your acquisitions and the recent slowdown, I was just curious, have you seen any kind of unusual competitive behavior that you had to factor into your guidance for next fiscal year? Or do you feel like things, even with what's going on in terms of distribution, things are fairly well in check in terms of what you are using income from the contribution?

We haven't, Steve. And we monitor that kind of thing pretty closely. But I would say, no, I don't. It's such a fragmented industry with the exception of a couple of industries that we don't see any sort of competitor or two getting to progressive. I think basically the industry has gone through, a few industries have gone through a little pause, but most of these industries are still fundamentally healthy and it's essential for our customers to keep adding connectivity to their products for them to stay competitive. So that's this secular trend that is so beneficial to us and for example, we are not really seeing any change certainly no slowdown in the rate of projects we bid on, design activity our customers are bringing us in on. So we were not seeing any of that. So the fundamental drivers of the business are still very robust. Great. That's encouraging. Thank you very much.

Thank you.

Thank you, Steve. It looks like there is no further questions. If anyone has any questions, please contact Investor Relations at TE. Thank you for joining us this morning and have a great day.